Sections 388, 389 and 390 of the Companies Act, 2013: Foreign Company Prospectus and Indian Depository Receipts

Updated: 17 September 2026

Sections 388, 389 and 390 form part of Chapter XXII of the Companies Act, 2013 dealing with companies incorporated outside India. They regulate expert consent in a prospectus, registration of a prospectus offered in India by an overseas company, and the legal framework for Indian Depository Receipts (IDRs).

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Section 388 - Provisions as to expert's consent and allotment

Meaning and purpose: Section 388 restricts the issue, circulation or distribution in India of a prospectus offering securities of a company incorporated, or proposed to be incorporated, outside India. Where the prospectus contains a statement attributed to an expert, the expert's written consent is required and must not have been withdrawn before delivery of the prospectus for registration. The prospectus must also state that the consent has been given and has not been withdrawn.

Core statutory requirements:

  • An expert whose statement is included in the prospectus must have given written consent to its issue in the form and context in which the statement appears.
  • The expert must not have withdrawn that consent before the prospectus is delivered for registration.
  • The prospectus must contain a statement confirming that the expert has given and not withdrawn the consent.
  • Where an application is made pursuant to the prospectus, the prospectus must have the effect of binding the persons concerned to Sections 33 and 40, so far as those provisions apply.
  • A statement in a report or memorandum appearing on the face of the prospectus, incorporated by reference, or issued with it is treated as included in the prospectus for this purpose.

In practical terms, Section 388 is an investor-protection provision. It helps ensure that an overseas issuer cannot use an expert opinion in an Indian securities offer without the expert's continuing written authority and without the prospectus satisfying the applicable allotment and listing-related requirements.

Section 389 - Registration of prospectus

Meaning and purpose: Section 389 requires registration before a prospectus of an overseas company is issued, circulated or distributed in India for subscription to securities.

Before such issue, circulation or distribution in India, a copy of the prospectus must be delivered to the Registrar. The copy must be certified by the chairperson and two other directors as having been approved by a resolution of the company's managing body. The prospectus must state on its face that the copy has been delivered for registration. Any consent required under Section 388 and the prescribed documents must be endorsed on or attached to the registered copy.

The provision applies whether or not the overseas company has established, or proposes to establish, a place of business in India. Accordingly, the trigger is the offering of securities in India through the prospectus, not merely the existence of an Indian office.

Section 390 - Offer of Indian Depository Receipts

Meaning and purpose: Section 390 is an enabling provision for Indian Depository Receipts. It authorises the Central Government, notwithstanding other laws then in force, to make rules concerning IDR offers by companies incorporated or proposed to be incorporated outside India.

The rule-making power covers:

  • the offer of Indian Depository Receipts;
  • disclosures in a prospectus or letter of offer connected with IDRs;
  • the manner in which IDRs are dealt with in depository mode and by custodians and underwriters; and
  • the sale, transfer or transmission of IDRs.

What is an IDR? An Indian Depository Receipt is a rupee-denominated depository receipt created by a domestic depository against the underlying equity of a foreign issuing company. It provides a mechanism through which a foreign company may access the Indian securities market, subject to the applicable company-law, securities-law and foreign-exchange framework.

Current regulatory framework for Indian Depository Receipts

Section 390 operates with the Companies (Registration of Foreign Companies) Rules, 2014, including Rule 13 governing IDRs, and the applicable regulations and directions administered by the Securities and Exchange Board of India and the Reserve Bank of India. SEBI's current investor guidance identifies the Companies Act, 2013, Rule 13 of the 2014 Rules, the SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2018, and the foreign-investment framework as principal parts of the IDR regime.

For listed IDRs, continuing listing and disclosure obligations are also relevant under the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015. Anyone planning an IDR issue should verify the latest amendments, eligibility conditions, disclosures, approvals and filing requirements from the official MCA, SEBI and RBI sources before acting.

Legal update note: The statutory text of Sections 388, 389 and 390 continues to govern the matters described above. Securities and foreign-exchange requirements can be amended independently, so transaction-specific compliance should be checked against the latest official rules, regulations, circulars and directions.

These sections should be read with the surrounding foreign-company provisions and with the prospectus provisions incorporated by reference. Section 388 expressly refers to Sections 33 and 40. Section 391 applies Sections 34 to 36 to a prospectus issued by a company incorporated outside India under Section 389 and to the issue of IDRs by a foreign company.

Read the official consolidated text of the Companies Act, 2013 on the Ministry of Corporate Affairs website or the Companies Act, 2013 on India Code.

Quick summary

This page is a general legal information resource. For a proposed securities issue or filing, verify the current law and regulatory requirements applicable to the specific transaction.